May 11, 2011

Microsoft founder, famous billionaire and clean energy supporter Bill Gates yesterday downplayed the notion that China is overtaking the United States in renewable energy at a breakfast meeting about climate change in Seattle.

"A lot of figures that are thrown about China are sort of these bogeyman, 'We should feel bad'-type things," he said. "But China is very important. China can be a part of the solution here."The event was sponsored by Climate Solutions, a Northwest-based nonprofit aimed at curbing global warming. Seated on a stage in front of a crowd of 1,200, Gates was interviewed by Jabe Blumenthal, the co-chairman of Climate Solutions and a former Microsoft executive under Gates.

Compared with the United States, China has a much bigger and rapidly expanding market, Gates said. Its amount of total power is going up by a factor of four. Even its ambitious energy efforts can't keep up with demand, Gates said.

China's nuclear expansion plan, for example, calls for expanding from 10.8 gigawatts to 80 gigawatts in a decade. That means building 70 new nuclear plants, which is significant. But that's still only enough to drive nuclear from 2 percent of China's total energy capacity to 4 percent, Gates said.

"Unless things get very economic, they are going to have to build a lot of coal plants to go with a lot of wind, a lot of solar and a fair bit of nuclear, as well," Gates said.

China's rapid growth and lower manufacturing costs stand out, Gates said, but the United States still has an advantage in innovation.

"The innovation will still have to count on wherever the top universities are," he said. "The United States has a completely gigantic share of that, so we need the innovators here. China needs to be a part of the solution, but we can't sit back."

Gates estimates that 70 percent of green energy startups are based in the United States, even if they're looking at manufacturing for cheaper rates in China. The United States needs to work with China because of this, he stressed. "Any solution that turns the energy game into a nationalistic one-upmanship game isn't going to get us where we need to go," Gates said.

More government-supported R&D needed

At home, the government isn't doing enough to invest in basic research and development and should more than double it, Gates said. A few good things have been done, including the founding of the Advanced Research Projects Agency-Energy, or ARPA-E. But even that doesn't get much money and almost had it all cut, Gates said.

Last year, Gates, venture capitalist John Doerr and General Electric CEO Jeff Immelt and a few others founded the American Energy Innovation Council, which lobbied the federal government to spend $16 billion a year on renewable energy development. It didn't pan out and, in face of a conservative House, probably won't for a while.

Still, Gates was adamant that research and development can only come from government. He said he's shocked that there's virtually no current bipartisan support for it.

Despite that, the Bill & Melinda Gates Foundation won't focus on clean energy, which he said is better-suited for venture capital. Gates has been investing into clean energy startups on his own. Yesterday, he met with venture capitalist Vinod Khosla, with whom Gates has supported clean energy companies, and talked with several of the startups.

"That upstream part is what makes me optimistic," he said, "even though we seem to have political road jam at least temporarily in some of the issues like carbon pricing."

Comparing computer industry to energy

At one point, Blumenthal brought up criticism of Gates for not being optimistic enough about low-carbon technology and not understanding the lessons of the computer industry. The conventional wisdom is that once energy regulations are made, private investments in the technologies will pile up and prices go down.

But between the two industries, the scale and amount of time a plan has to be invested in is entirely different, Gates said. Any new power plant has to have a planned 40-year life span to make sense, he said.

"The decisions you make now are based on some prediction about government policy way out there, decades in the future," he said. "Those kinds of things are so risky that there's a tendency to underinvest. When it comes to software and chips, the life cycles are two to three years, you understand who wants to buy them, and it's not subject to all this regulation."

The energy sector is going to be underinvested in unless the government promotes research and encourages investment by making its policy positions on incentives and regulations clear, Gates said.